Most financial advisors suggest that the earlier you start to plan for your financial future, the easier time you will have achieving your personal financial goals. Starting off on the right foot can be key to a lifetime of good money management and growing wealth.
Here are some personal finance tips from the experts for soon to be, or recent college graduates. According to Take Charge America’s Financial Education Center, here are five financial mistakes that new graduates should seek to avoid.
Living without a budget
To succeed with money, a budget is a must. Start by tracking your expenses for a month to learn your spending habits. Then, make necessary adjustments to accommodate your habits and goals.
Not planning for a rainy day
You never know when the unexpected will happen. That’s why we recommend saving three to six months of living expenses in an emergency fund. Start with small contributions and increase as your budget allows.
Opening lots of credit cards
Avoid the temptation to open multiple credit cards you don’t need. One card is enough to build a positive credit history, which plays a role in nearly every life milestone, from buying cars and homes to landing some jobs. Use one card regularly and pay it off in full every month. Avoid fees and interest by not overspending or carrying a balance.
Putting off retirement savings
As a new grad, the thought of retirement may seem like a lifetime away, but that’s to your benefit. The sooner you start saving, the more money you’ll have in retirement. Contribute to your 401(k) or company retirement plan and explore a Roth or Traditional IRA. Save what you can at first and steadily boost your contributions as your career progresses.
Neglecting your student loans
Since you just hung up your cap and gown, you have a six-month grace period before you must start repaying federal student loans. Even with the temporary payment reprieve, you still must select a repayment plan. If you don’t, you’re automatically enrolled in the Standard Plan, which requires fixed payments over ten years. That may not be the best option depending on your situation. If you’re overwhelmed, contacting an experienced student loan counselor can help.